by Art Macomber
Buying real estate in Idaho can catch even the most sophisticated buyer unaware. This article reviews general considerations to be made before making a residential or commercial purchase in Idaho. If you are from California, note that Idaho law does not provide many of the protections Californians take for granted when buying a home.
This posting is not legal advice. Legal advice is based on specific facts. This information is necessarily general in nature. Contact Bristol George for legal advice if you have a specific concern about a particular parcel.
- Black letter law. Idaho is a common law state where contract language is interpreted strictly and expressly, barring misrepresentation or provable fraud. Law before equity is the rule. So . . . assume nothing, check everything. “Buyer Beware” is alive and well in Idaho.
- Get it in writing. Require written documentation to substantiate oral representations prior to purchase. Oral contracts to convey interests in real property are invalid in Idaho. Idaho courts may or may not enforce oral agreements, but better to not have to go to court to find out.
- Be specific. Be prepared to identify and clarify vague, ambiguous, or overbroad contract wording. Idaho courts will not enforce any implied meanings or assumptions you had going into the purchase. Get specific before you buy.
Due Diligence issues:
Within a municipality with residential one- to four-unit zoning for parcels created by a platted subdivision, easements are typically referenced, access by public or private road is required, zoning is well-defined, and water, sewer, and power are usually provided. Buyers typically do not have problems with real property purchases of this type.
Outside of a municipality, perform your due diligence:
- Essential services. In other States, a public entity like a county or city is typically responsible for providing roads, water, sewer, fire, police protection, and sometimes power. In Idaho, these services may be provided by public or private entities. If public, services are usually handled by individual districts, i.e., water districts, road districts, sewer districts. The exception to this rule is some municipalities that have centralized the provision of services within its limits. Take the time to find out how services are provided to your land to determine whether such provision will be satisfactory.
- Survey. Unless there was a subdivision of a larger parcel and you can find the monument corners for your subject parcel, a ground survey or drone mapping flyover is recommended as a contingency of a purchase contract. A ground survey will determine the true boundaries of the parcel, rather than relying on alleged markers like hedges or fences, which frequently are not accurate representations. A drone mapping flyover will allow analysis of topographic and other features.
- Zoning. Regardless of the parcel’s zoning, you need to know what is allowed, including conditional uses, and whether a variance may be required for your planned use. Visit your county planning department for zoning information.
- Septic. If your parcel needs septic wastewater treatment onsite, you may need percolation testing. If there are significant rock outcroppings or other obstructions to provision of an underground septic system, particularly with drainage fields (primary and backup) but also with piping, significant additional expense may be determinative of your purchase decision. It may help to check with your potential neighbors for their experience with their land. Oral representations should be gathered as a first step, but never should be the deciding factor in your purchase decision.
- Water. Water rights in Idaho are gained by diverting water from a natural source to a beneficial use, and whether diversion is from surface water or from a well a permit is required from the Idaho Department of Water Resources (IDWR). If there is a well on your prospective parcel, you will need to contact IDWR for the well driller’s information. The issuance of a permit for a water right is a constitutional right in Idaho, and only injury to existing water rights can prevent or curtail the amount of water allowed to be diverted for a specific permit application. The priority of use in Idaho is “first in time, first in right.” In North Idaho, water shortages are generally not a problem, due to our position near the Continental Divide. Vacant parcels not served by an existing diversion will likely have no water rights, so don’t look for or expect them.
- Special needs. Be sure to account for special needs for your planned use, such as physical accommodations for handicapped persons or assessment of public school education.
- Sexual offenders. There is a publicly-accessible sex offender registry in Idaho, so you can plan for your family’s safety.
The Paperwork: The primary types of paperwork affecting the purchase of real property are documents found in the public record as listed in your preliminary title report, and any private equitable servitudes, conditions, restrictions, or rules and regulations governing the parcel’s use.
- Title Report I. Idaho residential purchase and sale agreements do not typically require disclosure of the preliminary title report prior to six (6) days before the close of escrow. However, a preliminary title report is critically important because that is where you find the list of documents in the public record that might affect title to or use of the land. Idaho commercial purchase and sale agreements require the seller to order a preliminary title report for the buyer upon acceptance of the offer.
- Title Report II. Due to differences in different types of residential and commercial contracts, we suggest you modify your contract to make acceptance of and approval of the preliminary title report and the documents identified in it a contingency of the contract. Require a minimum of ten (10) days for legal review and evaluation of those listed documents. As in most jurisdictions, Idaho title insurance will not cover any negative impacts that public documents may have on the title or the use of land. Review the preliminary title report and the public record documents prior to undertaking other due diligence. Your real estate purchase and sale agreement calendar of performance must account for this document review, along with review of necessary environmental reports, estoppel certificates, and other contingent documents such as may be used in commercial, industrial, or agricultural land purchase contracts.
- Covenants, Conditions and Restrictions (CC&Rs) CC&Rs are equitable servitudes, which are private, contract-based land-use rules imposed upon all parcels in a residential or commercial subdivision. Equitable servitudes “run with the land” meaning that, regardless of whose name is on title, the land-use restrictions survive any subsequent owner’s conveyance to a successor owner. Equitable servitudes are generally required on every new subdivision in Idaho, whether inside or outside a municipality. Within the world of governing documents, only the CC&Rs “run with the land.”
- Articles of Incorporation. The Articles of Incorporation are filed with the Secretary of State by incorporated, private non-profits (homeowner or condominium) set up pursuant to Chapter 30 in Title 30 of Idaho Code. Chapter 30 of Title 30 of Idaho Code is a general private non-profit corporation statute. There is no separate statutory regime governing homeowner or condominium associations as may be found in other States. Without a separate statutory regime, the explicit wording of the governing documents will rule in each case. Idaho statutes also allows for unincorporated associations, so the Secretary of State may have no record of your governing association.
- Bylaws and Rules and Regulations. Applicable bylaws and rules and regulations are other documents you may encounter.
- Homeowner Association Records. Financial or other governing entity documents include meeting minutes of boards of directors and members, and financial statements of account. Even without a homeowners association, a simple three-member road or septic or water system maintenance agreement should have financial records related to that maintenance. You need to ask for those records for your review and approval within the due diligence period negotiated in your real estate purchase contract, or be ready to live with the results after close of escrow. Look for financial records of funds held in reserve to assure capital maintenance can be completed without surprise special assessments. Monetary reserves for capital asset maintenance or replacement are not required in Idaho. This means associations with physical assets to maintain, be they land or mechanical in nature are better served with a portion of association dues going toward a reserve account in an amount sufficient to service the land or replace the physical asset at its projected end of life.
- Hierarchy of documents. If you purchasing in a homeowner or condominium association, look for an explicit explanation in those documents about which document controls in case of a conflict between documents.
- Property Managers. If you plan to use a property manager, be aware that property managers are not required to be licensed in Idaho. You will want to get references, check their credit, and check for lawsuits against them at the Idaho Court Repository. Beware of vague or undefined terms in property management contracts. Be especially careful of payouts to the manager based on unspecified percentages of tenant costs, late fees, pet deposits, and where your deposit monies are held and by whom. Retain control over your bank account, and do not give signing authority for more than a specified amount of money.
- Real Estate Agents. Idaho statutes delineate a real estate licensee’s obligations to a buyer or a seller. These statutory agency requirements are spelled out in a pamphlet but only required to be provided to residential purchasers. As is the case in other jurisdictions, allowing a real estate agent to represent both buyer and seller can be problematic, and in many cases presents an insurmountable conflict of interest.
- Earnest monies. Although there is a common-law-based fiduciary duty owed to someone for whom monies are being held by another for safekeeping, you don’t want to have to appear before a judge to have this affirmed. It is the preferred practice to deposit earnest monies for a real estate purchase and sales agreement with a neutral third party, usually the title company that is also performing escrow services. Some real estate companies and contracts still allow the buyer’s or seller’s broker to hold earnest money funds prior to close of escrow. Even though statutory requirements applicable to how a real estate broker accounts for earnest money are relatively precise, when a neutral third party holds the funds a signed release by both parties usually facilitates contract termination without litigation.
Smart is as smart does. Call us at 866-511-1500 for a no-charge one hour telephone consultation.